History of E-Commerce

byBill HazeltononAugust 19, 2009

Shopping on the internet is certainly a popular past time, an efficient time-saver, and a great way to comparison shop on virtually any kind of item you’re interested in. The history of e-commerce as most people think of it has a short but interesting time line. Most people don’t realize that e-commerce and its underlying technology have been around for about forty years.

We’ve provided a brief history of e-commerce below starting with its conception and rapid development and finishing with a brief description of e-commerce’s advantages and its early pioneers.

The Early Years

The term e-commerce was originally conceived to describe the process of conducting business transactions electronically using technology from the Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These technologies, which first appeared in the late 1970’s, allowed for the exchange of information and the execution of electronic transactions between businesses, typically in the form of electronic purchase orders and invoices. EDI and EFT were the enabling technologies that laid the groundwork for what we now know as e-commerce. The Boston Computer Exchange, a marketplace for used computer equipment started in 1982, was one of the first known examples of e-commerce. Throughout the 1980’s, the proliferation of credit cards, ATM machines and telephone banking was the next step in the evolution of electronic commerce. Starting in the early 90’s, e-commerce would also include things such as enterprise resource planning (ERP), data warehousing and data mining.

It wasn’t until 1994 that e-commerce (as we know it today) really began to accelerate with the introduction of security protocols and high speed internet connections such as DSL, allowing for much faster connection speeds and faster online transaction capability. Industry “experts” predicted explosive growth in e-commerce related businesses.

E-Commerce Begins to Emerge

In response to these expert opinions, between 1998 and 2000, a substantial number of businesses in Western Europe and the United States built out their first rudimentary e-commerce websites.

The definition of e-commerce began to change in 2000 though, the year of the dot-com collapse when thousands of internet businesses folded. Despite the epic collapse, many of the worlds’ most established traditional brick-and-mortar businesses were emboldened with the promise of e-commerce and the prospect of serving a global customer base electronically. The very next year, business to business transactions online became one of the largest forms of e-commerce with over $700 billion dollars in sales.

Many of the dot-com collapses “first-mover” failures served their offline competitors very well, providing evidence of what not to do in building a viable online business. For example, Webvan, which was one of the more infamous dot-com failures, trail blazed the path for Albertsons and Safeway, two of the largest national supermarket chains, who each have developed their own successful online grocery delivery businesses.

E-Commerce Pioneers

The birth of companies such as eBay and Amazon (launched in 1994) really began to lead the way in e-commerce. Both eBay and Amazon were among the first to establish prominent e-commerce brands. The most prominent e-commerce categories today are computers, books, office supplies, music, and a variety of electronics.

Amazon.com, Inc., founded by Jeff Bezos, was the original e-commerce pioneer and certainly the most recognizable. In the beginning, Amazon’s business model required massive investment in warehousing, delivery and fulfillment capability and took years for Amazon to gain profitability. But finally in 2003, almost 10 years after launching the company, Amazon.com realized its first annual profit.

Amazon began as just an online bookstore but over the years has extended its offering to a wide variety of product categories, including electronics, software, music, DVD’s, CD’s, video games, MP3’s, clothing, shoes, health and beauty products and even household goods. Bezos, was responsible for naming the company “Amazon” after the world’s largest river and it enjoys a truly global presence with stand alone websites in six other countries, including the United Kingdom, Canada, France, Germany, Japan and China. Amazon.com was also the original pioneer in affiliate marketing, allowing other websites to earn sales commissions for referring Amazon products to their customers. Today, Amazon generates anywhere between 30 to 40% of its total sales revenue from affiliates or third party merchants who list and sell their products on Amazon’s web site. Today, the Amazon moniker certainly applies as it is one of the most recognized and most profitable e-commerce businesses on the planet. In 1999, Jeff Bezos was honored with Time Magazine’s “Person of the Year” award, immortalizing him forever as probably the single most recognizable figure in the entire e-commerce community.

Amazon and fellow e-commerce industry giant Dell remain two of the largest internet retailers in the world, among other offline industry giants such as Staples, Office Depot, and Hewlett Packard. Dell.com is another one of the most recognizable e-commerce brands online. Dell.com’s website was launched in 1994 with a single static web page and their online presence quickly grew. In 1997, Dell announced a single-day sales record of a million dollars on its website. In fact, roughly half of Dell’s total profits come directly from their website alone. With no offline retail outlets to speak of, Dell is another e-commerce pioneer that many businesses have tried to model themselves after by selling products almost exclusively online.

E-Commerce Advantages

E-commerce businesses have numerous advantages over offline retail locations and catalog operators. Consumers browsing online stores can easily search to find exactly what they are looking for while shopping and can easily comparison shop with just a few clicks of the mouse. Even the smallest online retail sites can sell products and turn a profit with a very simple online presence. Web tracking technology allows e-commerce sites to closely track customer preferences and deliver highly individualized marketing to their entire customer base.

As the popularity of e-commerce businesses continues to grow, the technology will only continue to improve, making it even easier to open and operate a virtual online store with or without a brick-and-mortar presence. While e-commerce is still relatively new found territory, it certainly offers plenty of opportunity for entrepreneurs of all types.

In fact, sales data shows that from1999 until 2008 e-commerce sales have risen steadily and now account for nearly 4% of total sales worldwide.

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Great article!
Hey, http://www.BagsOnTheNet.com started in 1996, and what a different online world it is today vs. back then. In such a small amount of time, so much has changed. I am willing to answer question or help anyone that wants more information regarding the differences from back then to day. It’s only just the beginning.
Thanks.